Michael Broderick, the one-time army officer who’s now in charge of the latest State-backed plan to help first-time home buyers, sounds like he is talking about another lifetime when he recalls how he once held a private pilot’s licence.
“I really liked flying. I did it for about 10 years, but I gave it up about 20 years ago, before the kids arrived,” he says. “It just got too time consuming and expensive.”
But having spent much of his recent career serving as either second-in-command of asset recovery or residential delivery at Nama or, briefly, as interim head of House Building Finance Ireland (HBFI), Broderick has been given the controls of the First Home Scheme (FHS). This is the shared-equity plan championed by Minister for Housing Darragh O’Brien to help first-time buyers bridge the gap between their deposit and mortgage, and the price of a new home.
FHS, a 50:50 joint venture between the Government the three remaining retail banks in the State, can provide equity funding in exchange up to a 30 per cent stake in a home valued at as much as €450,000.
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Launched in early July, it’s part of a now potentially confusing array of supports for people seeking to buy a first home — also including the Local Authority Affordable Purchase Scheme, which replaced the Rebuilding Ireland Home Loan scheme earlier this year, and the Help to Buy Scheme that has been running since 2017.
It’s not without its critics. While the Central Bank of Ireland last year cleared the way for the banks to participate in the shared-equity scheme, it warned that the plan could push up house prices “by shifting the demand for house purchases” in a market that has long been short on supply. Opposition party Sinn Féin has decried it a “Del Boy” O’Brien response to the housing crisis.
But early demand has been strong. FHS reported last week that it had agreed, in its first three months in operation, to contribute an average of €79,000 of equity (in return for an average 22 per cent stake) towards the purchase of 508 new homes being acquired by first-time buyers who might ordinarily have struggled to get their finances in order to buy a home. Two-thirds of those it is backing are, as would be expected, from Dublin and the commuter counties of Kildare, Meath and Wicklow, where starter homes are more expensive than the national average. A further 200 or so applications are currently being processed.
“The average approval is certainly higher than what we were estimating when we were planning the scheme,” says Broderick. “But I think it reflects the fact that house prices have continued to increase.”
It won’t solve every problem for people that can’t get on the property ladder because of a funding gap — but can be of assistance to a lot of people
Residential property prices of new dwellings in the second quarter of 2022 were 7.7 per cent higher than in the corresponding quarter of 2021. Prices of existing dwellings were 16.3 per cent higher than a year earlier.
At the rate at which FHS has been allocating funds to its first batch of customers, the scheme will have assisted a little over 5,000 borrowers before its initial €400 million fund is used up. It was envisaged at the outset that the pot would help with the purchase of 8,000 new homes over five years.
Still, Broderick reckons that the Central Bank’s move last month to relax its mortgage rules to allow first-time buyers to take on a loan of up to four times income from January — compared to a ratio of 3.5 times until now — may result in those eying the First Home Scheme to seek less than has been the case in the first wave of applications.
“My expectation is that the average drawdown from us will reduce as a result of the Central Bank changes,” he says. “The biggest challenge we face now is making more people aware of it. It won’t solve every problem for people that can’t get on the property ladder because of a funding gap — but can be of assistance to a lot of people.”
A native of Athenry, Co Galway, Broderick entered the army on leaving St Jarlath’s College, Tuam, in 1985. “I had my sights set on the army from when I as 12 or 13. I had decided at that point in time of my then very short life that I didn’t want to spend my life working in an office.”
“The great thing about the army is that you get moved around a lot, so you don’t get stale in any one particular role,” he says.
Broderick spent two years overseas in his 21 years with the defence forces, including three six-month stints in Lebanon and six months in Western Sahara — as part of Ireland’s low-key, three-decade contribution to a UN mission in the disputed territory. The last Irish troops were withdrawn in 2021.
While in the army, Broderick undertook a masters in business administration (MBA) in finance with the UCD Smurfit Business School at the turn of the millennium, before joining the National Treasury Management Agency (NTMA), initially in its National Development Finance Agency (NDFA) unit, which provides advice to State authorities on public investment projects.
Projects included working on the proposed Dart Undergound, aimed at linking Heuston Station with the Dart line in Dublin, and Metro North during the boom. Both were shelved between late 2010 and 2011, when the State was in an international bailout programme.
“You’d love to think about where we’d be now in terms of infrastructure had those two projects proceeded,” he says. “But I don’t think it would have been conceivable to progress with such huge investments where the country was at the time [more than a decade ago].”
Broderick then found himself among NTMA staffers put to work in Nama, alongside hires from the battered property sector, as the new agency was being set up at the time.
Initially starting off as a loan portfolio manager in 2011, he moved up the ranks to become deputy head of asset recovery. In mid-2016, he became Nama’s deputy head of residential delivery, as the agency was pressed to fund the delivery of thousands of new homes with developers on its books to alleviate the post-crash shortfall in new houses being built.
In July 2018, Broderick was drafted in as the project lead on setting up HBFI, an agency staffed by NTMA employees that aims to fund commercially viable residential projects at market rates where developers might otherwise struggle to secure financing. It had granted a total of €1.16 billion of loans as of the end of June.
The biggest one is the narrative that this is another mortgage. It’s not. It’s not even close to another mortgage
Following a brief period as interim chief executive of HBFI, Broderick stepped into the role of chief commercial officer as Dara Deering, a former head of retail banking at KBC Banking Ireland, was appointed as the permanent head of the agency. He went for the top job but is philosophical about missing out.
“There were no guarantees or promises in relation to the top job. And, of course, it was a lending institution and Dara came with huge experience on the banking side,” he says. “I would like to think we achieved quite a bit working together.”
He jumped at the opportunity when he was approached to set up FHS. Initially brought in as interim chief executive, the interim part has been dropped in recent weeks as he remains on extended secondment from the NTMA.
The shared equity scheme, currently open to first-time buyers of new homes but soon to be extended to self-builds, can provide equity funding in exchange for between a 2.5 per cent and 30 per cent stake in a house valued at up to €450,000 — or an apartment priced at €500,000 — in Dublin or Cork City. The ceiling is as low as €250,000 for certain counties, including Carlow, Leitrim and Sligo. The limits for various local authority areas are currently being reviewed.
FHS can only fund up to 20 per cent of the purchase price in cases where borrowers are also availing of the Government’s Help to Buy Scheme, which allows first-time purchasers to claim income and deposit-interest tax refunds of up to €30,000 to accumulate a deposit to buy home.
Those participating in the scheme must have a minimum 10 per cent deposit, as required by the Central Bank mortgage lending rules for first time buyers. The plan is also for those who are formally separated or divorced if they no longer retain a stake in a family home — or if their property was sold as part of an insolvency or bankruptcy arrangement.
Those seeking to avail of the funding would initially have to secure mortgage approval in principle from one of the three banks involved in the shared-equity plan before approaching First Home Scheme for equity. Broderick says the organisation has contacted all nonbank lenders in the market about joining the joint venture, but so far only one — which he won’t name — has really engaged.
“The more lenders that are in it, the more choice consumers will have,” he says.
What are the biggest misconceptions about the scheme that Broderick has had to deal with?
“The biggest one is the narrative that this is another mortgage. It’s not. It’s not even close to another mortgage.”
The so-called service charge is zero for the first five years of the funding. It moves to 1.75 per cent per annum from year six through year 15, 2.15 per cent for the following 14 years, and 2.85 per cent from then on. While a participant can let the charge roll up — on simple interest terms — over their lifetime, it will ultimately have to be paid by the estate of the homeowner.
“If you could get me a mortgage like that in the market, sign me up straight away,” he says.
The FHS equity portion must be repaid, however, when a property is sold or is no longer the owner’s private residence, if the borrower switches to a mortgage lender not in the scheme, or when the last applicant dies.
The one thing I’ve ascertained from my involvement in housing over the last number of years is that delivery is an extremely complex process
In a scenario where house prices are expected to rise over the long term, it makes sense to pay back the equity portion of the financing, which would be increasing in monetary value, before making lump-sum payments against the loan. The minimum amount that a homeowner in the scheme can redeem at any one time is 5 per cent of the original amount provided by FHS.
The boost that the shared-equity scheme should have given to realisable demand for new homes — which is demand backed by financing — has not been reflected in recent housing starts. Figures released by the Department of Housing last month show that the number of residential units where construction has commenced had fallen 10 per cent on the year to 27,417 in September on a 12-month rolling basis — down from 34,846 in March and driven by a fall-off in apartment starts.
“The one thing I’ve ascertained from my involvement in housing over the last number of years is that delivery is an extremely complex process,” he says. “Everything from day one in the planning process, right through to utilities, design, materials, and building, there are so many things that can actually go wrong and delay everything.”
Problems caused by lockdowns during the height of the Covid-19 pandemic have been followed by soaring building material and energy prices, and rising interest rates.
“You just can’t turn the switch on overnight and hope there are going to be houses coming out at the end of the sausage machine the next day. It takes time. It takes all the right policies be put in place. But I think we’re getting there.”
As for house prices, Broderick says that his view “for what it’s worth is that there’s a possibility of some small correction”.
“I won’t use that awful phrase ‘soft landing’, because we know where that got us before. But we are seeing softening of house price [inflation].”
CV
Name: Michael Broderick
Position: Chief executive of First Home Scheme
Family: Married with a son and a daughter, both in college
Lives: Foxrock, Dublin 18
Something you might expect: He’s a member of the Institute of Directors
Something that might surprise: He used to be a committed recreational diver — “a long time ago”
